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Quanta Services (PWR) Up 3% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Quanta Services (PWR - Free Report) . Shares have added about 3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Quanta Services due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Quanta Services Inc. reported impressive earnings for fourth-quarter 2020. Adjusted earnings not only surpassed the Zacks Consensus Estimate but also grew impressively on a year-over-year basis. Meanwhile, revenues for the quarter beat the consensus mark but declined on a year-over-year basis.
Duke Austin, President and Chief Executive Officer of Quanta, said, "Quanta's utility solutions and delivery model continue to produce world-class execution and performance, which drove fourth quarter results that exceeded our expectations and completed a solid year for Quanta that included improved profitability and record earnings per share and backlog, despite the unprecedented conditions caused by the global pandemic."
Detailed Discussion
For the quarter under review, Quanta reported adjusted earnings of $1.22 per share that comfortably topped the consensus estimate of 98 cents by 24.5% and increased 31.2% from 93 cents a year ago.
Total revenues of $2,912.2 million surpassed the consensus mark of $2,907 million by 0.2%. The figure, however, decreased 6.4% year over year due to lower contribution from its Underground Utility and Infrastructure Solutions segment.
Operating margin for the quarter rose 130 basis points or bps from a year ago to 6%. Adjusted EBITDA of $319.8 million also improved 21.9% from $262.3 million a year ago.
The company reported 12-month backlog of $8,266.6 million and total backlog of $15,132.4 million at December 2020-end. At September 2020-end, 12-month backlog came in at $8,143 million and total backlog was $15,071.6 million. Moreover, the said metrics increased from 2019-end respective figures of $7,947.1 million and $15,004.9 million.
Segment Details
At Dec 31, 2020, Quanta changed the name of Electric Power Infrastructure Services and Pipeline and Industrial Infrastructure Services segments to Electric Power Infrastructure Solutions and Underground Utility and Infrastructure Solutions, respectively. Nonetheless, there was no change in the composition of the segments.
The company reports results under two reportable segments: Electric Power Infrastructure Solutions segment (accounting for 69.4% of 2020 revenues), and Underground Utility and Infrastructure Solutions (30.6%).
Fourth-quarter revenues from Electric Power Infrastructure Services totaled $2,105.8 million, increasing 14% year over year. Operating margins expanded 290 bps to 11.6%. The segment’s 12-month backlog was $6,070.6 million, up from $5,356.6 million a year ago. Total backlog of $10,981.2 million also grew from $9,822.2 million reported in the prior-year quarter.
Within the Underground Utility and Infrastructure Solutions segment, revenues declined 36.3% from the prior-year quarter to $806.4 million. Operating margin of 5.1% also contracted 190 bps year over year. The segment’s 12-month backlog totaled $2,196 million, down from $2,590.5 million a year ago. Also, total backlog declined to $4,151.2 million from $5,182.7 million in the prior-year quarter.
2020 Highlights
Adjusted earnings came in at $3.82 per share, up from $3.33 in 2019. Total revenues were $11.2 billion, down from $12.1 billion in 2019. Operating margin of 5.5% improved 90 bps for 2020. Adjusted EBITDA also increased to $1.05 billion from $941.8 million in 2019.
Liquidity
As of Dec 31, 2020, Quanta had cash and cash equivalents of $184.6 million compared with $164.8 million at 2019-end. The company’s long-term debt (net of current maturities) amounted to $1,174.3 million, down from $1,292.2 million as of Dec 31, 2019.
Net cash provided by operating activities was $1,116 million for 2020 compared with $526.6 million in 2019. Free cash flow for 2020 came in at $891.9 million compared with $297.9 million reported in 2019.
Recent Achievements
During the fourth quarter, Quanta completed the acquisition of a business that primarily provides aviation services to the utility industry, principally in California. Additionally, it completed another acquisition of a company that provides heavy civil, industrial, and energy construction and maintenance services in the western United States.
2021 Guidance
The company expects revenues in the range of $11.95-$12.35 billion. It expects adjusted earnings between $4.02 and $4.52 per share. Adjusted EBITDA is projected within $1.09-$1.19 billion. Meanwhile, Quanta’s full-year non-GAAP free cash flow is projected at $400-$600 million.
For the Electric Power Infrastructure Solutions Segment, it continues to expect base business services to provide mid-single to double-digit growth opportunities and increased contributions from larger projects, primarily associated with the previously announced projects in Canada. Overall, Electric Power revenues are expected between $8.3 billion and $8.5 billion, which includes $700 million in revenues from communications operations and no contributions from Latin American operations. From a seasonality perspective, it expects revenue growth in each quarter of 2021 compared with 2020, with quarter-over-quarter growth in the first and second quarters, potentially exceeding 10%. It expects first-quarter revenues to be the lowest in the year due to normal seasonal weather dynamics impacting certain construction activities. The high end of the expected revenue projection represents greater revenue growth opportunities in the third and fourth quarters relative to 2020. The company anticipates 2021 operating margins between 10.1% and 10.9%, which includes an operating income contribution of $29 million or 20 cents per share from the LUMA Energy, LLC (LUMA) joint venture and other integral unconsolidated affiliates.
For the Underground Utility and Infrastructure Solutions segment, it expects upper single-digit to double-digit revenue growth from 2020, with full-year revenues expected within $3.65-$3.85 billion. More than 90% of 2021 revenues expectation represent base business services, with larger pipeline project revenues at the lowest level in the last seven years. From a seasonality perspective, it expects first-quarter revenues to be the lowest in the year and decline more than 20% from first-quarter 2020 due to significantly reduced industrial services revenues and limited contributions from larger pipeline projects. Revenues are expected to increase sequentially in the third quarter, then again decline in the fourth, per typical seasonality. Quarterly revenues for the second through the fourth quarters of 2021 are expected to be higher on a quarter-over-quarter basis than 2020, with double-digit growth expected in each quarter. It also expects segment margins between 5.5% and 6%, led primarily by continued solid execution in gas utility operations for local distribution customers. For margins, the company expects a break-even contribution from industrial services operations in 2021 due to a persistently challenging energy environment that is impacting industrial customers. Traditionally, it generates lower revenues and margins in the first quarter due to typical seasonality. With the recent inclement weather across the majority of the United States further pressuring those operations, it expects margins to be between breakeven and a minor loss for the first quarter. However, the company expects solid improvement in the second and third quarters, with a likely seasonal decline in the fourth quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, Quanta Services has a great Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Quanta Services has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Quanta Services (PWR) Up 3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Quanta Services (PWR - Free Report) . Shares have added about 3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Quanta Services due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Quanta (PWR - Free Report) Q4 Earnings & Revenues Beat Estimates
Quanta Services Inc. reported impressive earnings for fourth-quarter 2020. Adjusted earnings not only surpassed the Zacks Consensus Estimate but also grew impressively on a year-over-year basis. Meanwhile, revenues for the quarter beat the consensus mark but declined on a year-over-year basis.
Duke Austin, President and Chief Executive Officer of Quanta, said, "Quanta's utility solutions and delivery model continue to produce world-class execution and performance, which drove fourth quarter results that exceeded our expectations and completed a solid year for Quanta that included improved profitability and record earnings per share and backlog, despite the unprecedented conditions caused by the global pandemic."
Detailed Discussion
For the quarter under review, Quanta reported adjusted earnings of $1.22 per share that comfortably topped the consensus estimate of 98 cents by 24.5% and increased 31.2% from 93 cents a year ago.
Total revenues of $2,912.2 million surpassed the consensus mark of $2,907 million by 0.2%. The figure, however, decreased 6.4% year over year due to lower contribution from its Underground Utility and Infrastructure Solutions segment.
Operating margin for the quarter rose 130 basis points or bps from a year ago to 6%. Adjusted EBITDA of $319.8 million also improved 21.9% from $262.3 million a year ago.
The company reported 12-month backlog of $8,266.6 million and total backlog of $15,132.4 million at December 2020-end. At September 2020-end, 12-month backlog came in at $8,143 million and total backlog was $15,071.6 million. Moreover, the said metrics increased from 2019-end respective figures of $7,947.1 million and $15,004.9 million.
Segment Details
At Dec 31, 2020, Quanta changed the name of Electric Power Infrastructure Services and Pipeline and Industrial Infrastructure Services segments to Electric Power Infrastructure Solutions and Underground Utility and Infrastructure Solutions, respectively. Nonetheless, there was no change in the composition of the segments.
The company reports results under two reportable segments: Electric Power Infrastructure Solutions segment (accounting for 69.4% of 2020 revenues), and Underground Utility and Infrastructure Solutions (30.6%).
Fourth-quarter revenues from Electric Power Infrastructure Services totaled $2,105.8 million, increasing 14% year over year. Operating margins expanded 290 bps to 11.6%. The segment’s 12-month backlog was $6,070.6 million, up from $5,356.6 million a year ago. Total backlog of $10,981.2 million also grew from $9,822.2 million reported in the prior-year quarter.
Within the Underground Utility and Infrastructure Solutions segment, revenues declined 36.3% from the prior-year quarter to $806.4 million. Operating margin of 5.1% also contracted 190 bps year over year. The segment’s 12-month backlog totaled $2,196 million, down from $2,590.5 million a year ago. Also, total backlog declined to $4,151.2 million from $5,182.7 million in the prior-year quarter.
2020 Highlights
Adjusted earnings came in at $3.82 per share, up from $3.33 in 2019. Total revenues were $11.2 billion, down from $12.1 billion in 2019. Operating margin of 5.5% improved 90 bps for 2020. Adjusted EBITDA also increased to $1.05 billion from $941.8 million in 2019.
Liquidity
As of Dec 31, 2020, Quanta had cash and cash equivalents of $184.6 million compared with $164.8 million at 2019-end. The company’s long-term debt (net of current maturities) amounted to $1,174.3 million, down from $1,292.2 million as of Dec 31, 2019.
Net cash provided by operating activities was $1,116 million for 2020 compared with $526.6 million in 2019. Free cash flow for 2020 came in at $891.9 million compared with $297.9 million reported in 2019.
Recent Achievements
During the fourth quarter, Quanta completed the acquisition of a business that primarily provides aviation services to the utility industry, principally in California. Additionally, it completed another acquisition of a company that provides heavy civil, industrial, and energy construction and maintenance services in the western United States.
2021 Guidance
The company expects revenues in the range of $11.95-$12.35 billion. It expects adjusted earnings between $4.02 and $4.52 per share. Adjusted EBITDA is projected within $1.09-$1.19 billion. Meanwhile, Quanta’s full-year non-GAAP free cash flow is projected at $400-$600 million.
For the Electric Power Infrastructure Solutions Segment, it continues to expect base business services to provide mid-single to double-digit growth opportunities and increased contributions from larger projects, primarily associated with the previously announced projects in Canada. Overall, Electric Power revenues are expected between $8.3 billion and $8.5 billion, which includes $700 million in revenues from communications operations and no contributions from Latin American operations. From a seasonality perspective, it expects revenue growth in each quarter of 2021 compared with 2020, with quarter-over-quarter growth in the first and second quarters, potentially exceeding 10%. It expects first-quarter revenues to be the lowest in the year due to normal seasonal weather dynamics impacting certain construction activities. The high end of the expected revenue projection represents greater revenue growth opportunities in the third and fourth quarters relative to 2020. The company anticipates 2021 operating margins between 10.1% and 10.9%, which includes an operating income contribution of $29 million or 20 cents per share from the LUMA Energy, LLC (LUMA) joint venture and other integral unconsolidated affiliates.
For the Underground Utility and Infrastructure Solutions segment, it expects upper single-digit to double-digit revenue growth from 2020, with full-year revenues expected within $3.65-$3.85 billion. More than 90% of 2021 revenues expectation represent base business services, with larger pipeline project revenues at the lowest level in the last seven years. From a seasonality perspective, it expects first-quarter revenues to be the lowest in the year and decline more than 20% from first-quarter 2020 due to significantly reduced industrial services revenues and limited contributions from larger pipeline projects. Revenues are expected to increase sequentially in the third quarter, then again decline in the fourth, per typical seasonality. Quarterly revenues for the second through the fourth quarters of 2021 are expected to be higher on a quarter-over-quarter basis than 2020, with double-digit growth expected in each quarter. It also expects segment margins between 5.5% and 6%, led primarily by continued solid execution in gas utility operations for local distribution customers. For margins, the company expects a break-even contribution from industrial services operations in 2021 due to a persistently challenging energy environment that is impacting industrial customers. Traditionally, it generates lower revenues and margins in the first quarter due to typical seasonality. With the recent inclement weather across the majority of the United States further pressuring those operations, it expects margins to be between breakeven and a minor loss for the first quarter. However, the company expects solid improvement in the second and third quarters, with a likely seasonal decline in the fourth quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, Quanta Services has a great Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Quanta Services has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.